On January 29, 2005, we reported
under the headline, “Dramatic
Development,” that the U.S. Court of Appeals for the Second
Circuit had issued a decision in Schulz v. IRS. The Court held that
taxpayers cannot be compelled by the IRS to turn over personal and private
property to the IRS, absent a federal court order.

In our January report, we quoted from the decision,

“...absent an effort to seek
enforcement through a federal court, IRS summonses apply no force to
taxpayers, and no consequence whatever can befall a taxpayer who refuses,
ignores, or otherwise does not comply with an IRS summons until that summons
is backed by a federal court order…[a taxpayer] cannot be held in contempt,
arrested, detained, or otherwise punished for refusing to comply with the
original IRS summons, no matter the taxpayer's reasons, or lack of reasons
for so refusing.”

We reported that the DOJ stated in its motion that, “...the Court's
opinion threatens to seriously impede the effective administration and
enforcement of the nation's tax laws.”

We reported that the DOJ chastised the Court for “creating a false
impression,” and “misapprehending” and “misunderstanding” and “misstating”
and being “inaccurate,” regarding the “consequences that flow from the
issuance of an IRS summons.”

On
June 29, 2005, the Court issued its much-anticipated decision regarding the
government’s motion to amend the Court’s earlier ruling. With a firm
reliance on the Court’s primary role of protecting the People’s individual,
unalienable Right to Due Process guaranteed by the 5th and 14th
Amendments, the court soundly rejected the government’s pleading.

Writing for the three-judge panel, Judge Straub wrote, in part:

“…The government has moved to amend
our per curiam opinion, reported at Schulz v. IRS., 395 F.3d
463 (2nd Cir. 2005) (“Schulz I”)… Having considered the
arguments of the parties, we grant the petition to rehear for only the
limited purpose and to the extent necessary to clarify our prior opinion and
hold that: 1) absent an effort to seek enforcement through a federal court,
IRS summonses “to appear, to testify, or to produce books, papers, records,
or other data,” 26 U.S.C. Section 7604, issued “under the internal revenue
law, “ id., apply no force to the target, and no punitive consequences can
befall a summoned party who refuses, ignores, or otherwise does not comply
with an IRS summons until that summons is backed by a federal court order;
2) if the IRS seeks enforcement of a summons through the federal courts,
those subject to the proposed order must be given a reasonable opportunity
to contest the government’s request; 3) if a federal court grants a
government request for an order of enforcement then any individual subject
to that order must be given a reasonable opportunity to comply and cannot be
held in contempt or subjected to indictment under 26 U.S.C. section 7210 for
refusing to comply with the original, unenforced IRS summons, no matter the
taxpayer’s reasons or lack of reasons for so refusing.” [page 3].

“…the government appears to argue
alternatively, or in combination, that: 1) the government may use the
federal courts to punish taxpayers who disobey an IRS summons even if the
summons is never enforced by court order; 2) if an IRS summons is enforced
by a court order, the court may punish disobedience of the IRS summons
before providing the taxpayer an opportunity to comply with the court’s
order; or 3) if an IRS summons is enforced by a court order, the court may
punish disobedience of the IRS summons even if the taxpayer complies with
the court’s order. In our view, expressed in Schulz I, none of these
proposals is consistent with the comprehensive tax-enforcement scheme in
which 26 U.S.C. sections 7210, 7604(a) and 7604(b) are situated,
constitutional due process, or the relevant precedents of this Court and the
United States Supreme Court…" [ page 5].

Trumpeting the primary role of the Judiciary of protecting the People from
unconstitutional acts of the other two branches of the government, the Court
went on to say:

"…the IRS summons is
administratively issued but its enforcement is only by federal court
authority in an adversary proceeding affording the opportunity for challenge
and complete protection to the witness.” [page 9] (emphasis in the
original).

Most
significantly, the Court held, relying on a 1920 decision by the United
States Supreme Court, that the principles of due process apply to all
administrative orders. We take that to mean the Court’s order applies
not only to IRS first party summonses, but also to IRS third party
summonses, and to IRS levies and liens.

In what may be the most significant sentence in the 13-page decision, the
court stated:

“The rule of due process upon which
we relied in Schulz I, and upon which we rely now, can be stated
thus; any legislative scheme that denies subjects an opportunity to seek
judicial review of administrative orders except by refusing to comply, and
so put themselves in immediate jeopardy of possible penalties ‘so heavy as
to prohibit resort to that remedy,’ Oklahoma Operating Co. v. Love,
252 U.S. 331, 333 (1920), runs afoul of the due process requirements of the
Fifth and Fourteenth Amendments.“ [Page 10].

Although the objects in contention in Schulz were IRS administrative
summonses, it is unavoidable that the Due Process issues raised and
articulated by the Court in Schulz have direct implication for all
forms of routine IRS administrative process including liens, levies and
seizures. This decision reiterates those constitutional principles.

The Court's reaffirmation of SchulzI is clear: any
legislative scheme that forces a taxpayer to make a “Hobson's choice”
between either capitulating to an IRS administrative demand, or risk bearing
the pains of IRS's wrath if she refuses to comply -- without access to
judicial review, violates the Constitution.The Court granted both Schulz and the
Government 45 days to file a petition for an en banc rehearing.

Although the
Second Circuit's decision has profound implications in its own right, to
date, neither the Court nor the Government have addressed the fundamental
issue underlying the original litigation – i.e., Schulz's claim that the IRS
summonses were issued to him for the sole intent of infringing and defeating
the First Amendment Right to Petition process that Schulz and the WTP
Foundation are championing and which challenges, on constitutional grounds,
certain actions of the government, including the authority of the IRS to
force ordinary working Americans to pay a direct, un-apportioned tax on
their labor.

Part of this historic effort includes the landmark
Right-to-Petition lawsuit which is currently awaiting further action by
the DC District Court. In that lawsuit, nearly 2000 Americans have
petitioned the Court seeking a declaration of their Right to withhold taxes
from their servant government until their Petitions are answered and Redress
for Grievances is secured, a Right explicitly expressed in 1774 by the
Founding Fathers, while sitting as the Continental Congress after the war
with England had begun. (Journal Number 1, Continental Congress).

We would also remind each of our supporters to use the
"MyWTP" link located on the header of every WTP web page

This function enables you to update your personal information,
change your e-mail address,
sign up as a WTP Congress volunteer,
become a local Coordinator, perform
Coordinator restricted functions,
and access the secure content
on the WTP site.